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Hi Joe
thanks for correcting me with regard to Canada being outside the Sterling area.
It was a stupid oversight on my part, because Canada's major trading partner has
always been the USA, and hence used the same currency. ( I believe at a fixed
ratio set by the Canadian government). Canada was never in the same position as
NZ who at one stage had as much as 90% of its overseas exchenge with Britain,
but you are quite right when you observed that "Imperial Preference" helped to
bolster a considerable amount of trade between Canada and Britain. After WW2 the
loss of preeminence for Sterling as a trading currency came about as a result of
the "Bretton Woods" conference which, while establishing the World Bank and IMF
ostensibly to "stablise" trade, also established the Dollar as the trading
currency for Oil. This immediately placed pressure on the Pound Sterling as a
trading currency. The USA could do this because it was still then a net exporter
of oil and could control the amount of oil flowing onto the world market.
Western Europe, including Britain, was a net importer and was vunerable to oil
price fluctuations. The US hierarchy recognised that oil would become the single
greatest and most important trading commodity after WW2. Having all oil trade
dependant upon the supply of US Dollars onto the world trade market has enabled
the US to offset inflationary trends at home by manipulating the
oil supply. Price increases demanding more dollars. The British
government were not unhappy with this arrangement because it took pressure
off Sterling so that it did not have to remain at a relatively high value with
respect to other currencies. Nevertheless Sterling is tied rigidly to the Dollar
and the two currencies support one another in International
trading.
We, in new Zealand now have a very large
percentage of our trade with Australia now as a consequence of our free trade
agreement between the two countries. Trade with Britain has been reduced to
about 10% of our total trade now. Our major trading partners after Australia are
Japan, Taiwan, China, India, South east Asia, and the USA. This leaves us
vunerable to the machinations of the IMF and World Bank instead of the Bof
E. You can't win can you?
regards
Bill Mc G
----- Original Message -----
Sent: Saturday, December 22, 2007 3:31
AM
Subject: Re: [socialcredit] Re: Article
by Richard Cook
Hi Bill (McGunnigle),
Thanks again for shedding some further light on an area
that needs illuminating. My understanding is that Canada never was in
the 'Sterling area', as were most other independent Dominions of
the Empire, and most of the Crown Colonies, etc.
Even though our trade with Britain and other Empire
jurisdictions was substantial, and protected due to "Imperial
Preference" trade agreements, we were in the 'Dollar area'.
Canada, for whatever reasons, perhaps to show we were
'independent' of British Government foreign policies, or maybe under pressure
from Washington, resisted efforts by Britain to form a more
cohesive intra-Empire trading 'bloc' after World War Two.
I believe that was something Winston Churchill was
pushing for, but Ottawa wouldn't go for it. It would be another one of
those interesting speculations to ponder "what if" that had
happened. For the Empire was physically even more internally
'self-sufficient' in regards to resources and markets than America,
or the Soviet bloc, or a united Europe. Doubtless ''financial'' considerations
played a large role in scuttling that idea. Though the personality and
mind-set of Churchill and some of the other British proponents might have been
detrimental to the idea too.
I'll have to go through what you've written further,
Bill, and try to piece together how the 'competition' you mention fits into
it. Out of time right now.
Regards,
Joe
----- Original Message -----
Sent: Thursday, December 20, 2007 11:59
PM
Subject: Re: [socialcredit] Re: Article
by Richard Cook
Hi Joe
What
you have postulated is essentially correct. However the BofE never held
substancial amounts of NZ currency. NZ pounds were changed into Pounds Sterling in NZ by the NZ Reserve Bank. NZ companies
were required to purchase Sterling from the Reserve Bank in order to
undertake overseas purchases, thus NZ currency never reached Britain.
I believe the pressure from the Bof E was from
British Banks that, up until the advent of the
Labour government, had monopolised loans extended throughout the NZ economy.
They found themselves in direct competition with a government backed bank
that could afford to offer loans at 0.5-1.0%. Obviously they could not allow
any other British Empire "colony" to follow NZ's example, because a substantial amount of Britains overseas
earnings came from Banking "investments" in the form of loans to all Empire
colonies, hence the pressure. I am sure something similar was directed
towards Canada and Australia to force them to remain within the Sterling
area prior to 1939.
The position of the Bof E acting as
the the holders of overseas exchange for Empire and Commonwealth gave it a
unique position as banker for the Sterling area. It could therefore exert
pressure on those countries by withholding the
exchange reserves it held in safekeeping for Sterling
area countries. I am sure the BofE would have acted in this way no matter
what, once it became apparent that the NZ government had determined to
become the master of its own currency and foreign exchange rate. It was a
necessary step for the Bof E to maintain its financial control of NZ's
developement against NZ government efforts to become autonomous.
This is my interpretation of the actions
taken by the Bof E in 1938. Nevertheless I concede that there are still too
many "What ifs" and " If only's" in the whole senario. That all the
negotiations have been embargoed until 75 years after the event doen't help
matters either. Furthermore I suspect that once the time expires they will
be reembargoed for a further 75 years. This seems to
be a common factor in these events.
regards
Bill
McGunnigle
--- Original Message -----
Sent: Friday, December 21, 2007 3:29
AM
Subject: Re: [socialcredit] Re:
Article by Richard Cook
Hi Bill (McGunnigle),
Many thanks for providing the background details in
regards to the New Zealand experience.
Could it be that what your first Labour
Government was attempting was tantamount to a continual 'devaluation' of
the New Zealand pound? (I don't know the answer to that, quite
honestly, but it would seem to me that might be the
case.)
If that were so, then perhaps your main trading
partner, Britain, ran the risk that what had been acquired by the
BofE in New Zealand denominated funds through trade balance settlements,
(instead of a transfer of actual gold or silver), might quickly become
progressively worthless as effective demand for further NZ
goods?
If such were the case, and its holdings of foreign
exchange reserves in NZ pounds were substantial, wouldn't it be likely
that the BofE would naturally try to discourage the new found 'financing'
method for Government infrastructure for that reason alone, if none
other?
Now I don't have the answers to that, and maybe I'm
way off track even in considering the issue that way. And if I am,
I hope anyone with greater knowledge in these matters will come
in and set me straight. But at the moment, that's what comes to
mind.
If your first Labour Government could
have gone instead to some variant of the CPD mechanism, which,
in effect, makes each unit of NZ currency held capable of purchasing
'more' in NZ goods and services, I wonder how the BoE would've viewed
that? Other considerations aside, wouldn't it be possible you might
have had quite a sudden 'trade boom' with Britain and found funding
infrastructure a lot easier?
It's always interesting to speculate what might have
happened when we ask "what if" or "if only" we'd done something
differently, but really, all things are so interconnected it would be
almost impossible to ever know.
Regards,
Joe
----- Original Message -----
Sent: Wednesday, December 19, 2007
9:12 PM
Subject: Re: [socialcredit] Re:
Article by Richard Cook
Hi Joe
Further to John Rawson's remarks on the use of Reserve Bank Credit for
infastructure building works by the 1935-1949 Labour government of New
Zealand, from my historical research into that
government, The Bank of England expressed great
disapproval of this method of financing New Zealand's internal
infrastructure developement. It, therefore, took the unprecedented step in late 1938, supported by the British
government, threatening to freeze all of New Zealand's overseas exchange
funds to which it had security rights, (New Zealand was part of the
Sterling area then) unless it discontinued the practice. This put a
temporary hold on the practice, but, in 1939, with the outbreak of
WW2, the Bank of England was in no position to continue to hold that
threat over NZ, because NZ was a reliable supplier of essential raw
material for the war effort. Consequently despite the enormous amount of
expense, relatively speaking, that the war cost NZ, the bulk of the war
debt for NZ was to its own Reserve Bank at a nominal interest rate. NZ
had a balance of payments surplus during the war years because of this.
Demand for NZ products after WW2 continued to exceed supply and it was
not until the 1970's that NZ started to experience balance of payment
deficits. Significantly the end of the 1st labour government in 1949 saw
the downturn in the balance of trade with the advent of a series of
National governments that steadily reduced the strict monetary exchange
rules enforced by the 1st Labour government. However, ironically, it was
the 3rd Labour government 1972-75 that removed exchange rate controls,
and it was from that point onwards that NZ began to experience
serious balance of trade deficits. The swing to the extreme right during
the 1980's and 1990's completed the exchange rate "liberation", and NZ
has never been able to post an overall balance of trade surplus since
then.
I trust this amplifies some of the
detail around the question
regards
Bill Mc Gunnigle
----- Original Message -----
Sent: Thursday, December 20, 2007
9:48 AM
Subject: RE: [socialcredit] Re:
Article by Richard Cook
Thanks Joe.
The first parts remain theory either way
for me and I keep an open mind until someone comes out with hard
facts.
But your comment on NZ is wrong. There was no debt attached
to the use of Reserve Bank credit for Government operations. It was
new money issued for the purpose, non-repayable. For local bodies and
the Dairy industry, yes, you are right. But the interest charged
was only 1% and the finance probably would not have been available
elsewhere. Making this repayable meant that more could be issued as it
was returned, or alternatively made the debt bearable if it was not. .
This distinction is in accord with our present party policy here.
I
notice Richard has not replied to your comment on inflation, so try
this translation. "No more inflationary than any other issue of
new money from any source." That would, of course, include money
issued by a Credit Authority as per Douglas recommendation.
The
issue over government use of new money has nothing whatever to do with
(demand pull) inflation. If it is confined to the amounts needed to
balance the prices of goods, there should be none under either
system. The critical point is that, in a dictatorship,
Government spends all new money into circulation and therefore
determines what shall be produced. We saw that in Soviet
Russia., and to some extent in Nazi Germany, both of which seem to
have operated a form of monetary reform. In a democracy, the
public would be given at least some of the new money to spend into
circulation so that they get to determine what goods shall be produced
per economic democracy. However, in the modern high taxation
state, it would be ridiculous to pass all new money to the public and
then simply tax a large proportion back from them before it could be
spent.
It is a pity if great ideas are made ridiculous by slavish
adherence to totally impractical concepts
Regards. John
R.
Date: Tue, 18 Dec 2007 20:03:47 -0500
From:
thomsonhiyu@shaw.ca
To: socialcredit@elistas.com
Subject: Re:
[socialcredit] Re: Article by Richard Cook
(John Rawson wrote:-) So the whole reform
constitutional argument is based on the clause "To coin
money"? It could be claimed logically that, since coinage
was the only form of money then, this was intended to cover all
money?
(Joe replies:-) But it wasn't the only form of 'money'
then, John.
(John Rawson:-) I note again your reaction to the
Guernsey story, but you have never given hard facts for your
attitude. So far there appears to be more evidence for this
event than against.
(Joe replies:-) That story was thoroughly vetted on
here, or the predecessor list, quite some time ago. The
''States Notes", if I recall correctly from what was
determined in examining the issue then, were redeemed by
import duties. They weren't 'debt-free' money.
(John Rawson:-) After all, why should anyone invent
such a happening in such an unusual place otherwise?
(Joe replies:-) There was a lot of
propaganda put forth by various 'monetary reformers', John.
BC's own G. G McGeer, a former Vancouver Mayor, who was later a
MLA, a MP, and finally a Senator, was one latter day one. He
was aided and abetted by still others who'd previously created
'facts' out of fiction to further their own ends. The
myth might grow and grow, but it's still myth.
(John Rawson wrote:-) And would you argue that
the actions of New Zealand's first Labour Government in funding
much of infrastructure, state housing for homeless, and the dairy
industry with Reserve Bank credit at 1% is a myth?
(Joe replies:-) They 'primed the pump'
with deficit financing. That's all they did. It
relieved unemployment, and stopped the deflationary spiral
that you were in.
In a deflation it's hard to sell
anything other than essentials, for why would you want to buy
anything today if you felt you could get it cheaper
tomorrow? And when prices have to be lowered below financial
cost to move existing product, there's no inducement to produce
any more.
So your government turned that around,
and when prices started to come up, then there's an
inducement to buy before they go higher. It's a quick fix,
but it doesn't really solve the problem. And when it's
carried on for any length of time you'll get an 'inflation'
that'll negate its benefits. It is a crummy substitute for
Social Credit properly applied.
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